Buy/Sell Agreements For Business Owners
As a business owner, ensuring the longevity of your company is an important, and often overlooked, part of your financial plan. While business partners usually believe they will be in business together well into the future, this is not always the case. There are numerous situations that can impact the success of your business, which deserve serious consideration.
Your business can be disrupted if one partner dies, or leaves due to permanent disability, retirement, bankruptcy, divorce or an unresolved dispute between business owners and shareholders. If your business loses an owner, the remaining partners must decide how the business will continue. You generally have four options to consider:
- Close down the business - after all the time, energy and money invested, this may not be a practical option
- Continue the business with a new partner (i.e., spouse of the deceased)
- Sell your shares - who will buy them and at what price?
- Purchase the shares from the deceased owner's estate
A Buy/Sell Agreement can protect your business from the potential damage of losing a partner. This type of agreement covers both the terms of ownership and the operation of your business, and should be a crucial element of your business plan.
A Buy/Sell Agreement addresses the death, disability and retirement of one of the owners, as well as disagreements about ownership and operation of the business that can result when an owner wants to exit the partnership. The agreement often includes a formula or process for valuing the business to simplify the buy-out of an owner.
Our Investment Advisors work in conjunction with a CIBC Wood Gundy Estate Planning Specialist* and with the business owner's legal council to develop and implement strategies and funding appropriate for each unique situation.
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